JUST ONE IN 20 (6%) of companies has changed its auditor ahead of compulsory audit tender rules coming into effect in October.
Research from Bloomsbury Professional found just under 3,000 businesses with a turnover of more than £6.25m switched their audit provider in the last full financial reporting year. The study reviewed audit arrangements for 49,000 companies in 2011/12.
In October, Competition & Markets Authority (CMA) – formerly the Competition Commission – orders come into effect requiring all FTSE 350 companies to tender at least every ten years. Businesses that do not tender after five years will have to state when they plan to and why they have not yet gone to market.
The introduction of the rules is likely to drive a spike in audit tender activity, Bloomsbury Professional said. However, managing director Martin Casimir said it seems most companies “are not going to make changes until they have to”.
While firms outside the Big Four see mandatory tendering as a “great opportunity” to win new clients, challenging the experience of PwC, Deloitte, KPMG and EY in auditing large and complex businesses will take time, he said.
The previous peak in audit change activity came in 2009, when 13% of companies changed firms as they sought cost reductions following the financial crisis.
Casimir said: “We still live in a world where a FTSE 100 company switching auditors makes headlines, but the new tendering rules are likely to change that. Decades-long relationships between businesses and their auditors may become a thing of the past.”
A series of FTSE 100 companies, including RBS, have announced their intention to tender their audit contracts in the coming years, while high-profile businesses such as Barclays, Marks & Spencer and Vodafone switched their firm in the last 12 months.